Tuesday

More gavels go down as market heats up

Less distressed real estate is not fazing auctioneers who are reaping the benefits of rising prices, demand and technology.

Although auctioneers insist it's incorrect to associate auctions with strictly fiscally ailing properties — they argue auctions are an accelerated form of realty marketing — the business has weathered the drop of court and lender-owner sales thanks to the renewed appetite for commercial and residential real estate.

Michael Berland, a Cleveland-based principal and managing director in the Chartwell auctions unit of Hanna Commercial real estate, said, "We're seeing more transactions and better values as well as a lot of adaptive reuse properties. We're selling a lot of land and high-end homes at auctions, including the $4.8 million sale of a Hunting Valley house in September, the highest price we've gotten for a residential property."

Acknowledging that luxury homes costing more than $600,000 are the slowest properties to move in the residential market, Berland argues they are a good match for auctions because the extensive publicity and advertising before an auction helps brokers find potential buyers in a shorter period of time than traditional listings. He's working with owners of another four mansions valued at more than $2.5 million he hopes to auction in the next few months.

"We're also seeing the benefits of our (2013) affiliation with Howard Hanna," Berland said, "because we are networking with about 9,000 residential agents. Auctions help because they draw buyers with the illusion of a bargain."

Sheila Rosen-Schiff, the owner and marketing manager of Beachwood-based Rosen & Co. auctioneers, said her firm is doing considerably more real estate auctions. That's because the listing market for homes is so strong many homes get multiple offers in any case.

"There's a better opportunity to maximize the result," she said, "rather than having set a number for the house, have someone jump on it and sell less than its true value." While she said her firm is getting more "showcase" properties, it's also handling auctions for more affordable homes.

While that works out well for some buyers, particularly investors, other brokers point out that first-time home buyers need more assistance getting through the search, lending and purchasing process. That's also partially due to the nature of an auction, because auctions typically require people to place a deposit to bid and be prepared to close quickly.

George Kiko, an auctioneer and member of the board of directors of family-owned Kiko Realtors and Auctioneers of Canton, said the rise of home and other property values are lifting sales volumes in the auction business.

"The best thing is that compared to two years ago, instead of getting $150,000 you are getting $200,000 for the same house. The commissions (or auction premiums) are greater," said Kiko, whose firm regularly handles properties in Cuyahoga and Summit counties and does more than 1,300 auctions annually. Most of the credit for more auction action goes to the higher employment rates, which have allowed buyers to be confident investing in real estate.

Kiko and others say the rise of television programs such as "Storage Wars" and "American Pickers" have made more people familiar, and more comfortable, with auctions. Over time, he said, that has started to influence the real estate market, where people generally have to see and inspect a property to pursue it.

Technology also is having an impact on the auction business, as most firms now do online auctions or stream live, call-out auctions.

Rosen-Schiff said her family-owned firm was started by Gus Rosen who used a megaphone to chant for offers in 1917 but now benefits from the internet.

"This technology allows us to reach a broader, worldwide market," Rosen-Schiff said. "Typically we see at least one buyer from every continent. It's also getting to be a younger crowd, although we see some people we've known for years."

Social networking is also benefiting the auction business, which traditionally thrived on signs, snail mail and newspaper ads. Twitter and other forms of social media are such a factor, Kiko said, that the family-owned firm with 45 auctioneers among its 150 staffers last year added a full-time social media coordinator.

Howard Hanna even has a smartphone app for its auction business.

While some auctions are held on site, Berland said Howard Hanna likes to combine multiple pieces of property that it will auction on the same day in a hotel ballroom. That reduces overhead costs. Moreover, it increases the psychology that's the foundation for auctions: if you don't buy then, if the reserve is met, a buyer may not get another chance.

"The fear of loss is a motivating factor for many buyers," Berland said.

Rosen-Schiff noted that being associated with auctions benefits her firm's traditional real estate practice. The association with an auction firm creates an added sense the property may sell soon, she said.

Salon owner and luxury home builder Dino Palmieri of Solon said he has bought several properties at auction over the years, especially for his residential land development business.

"Auctions create momentum and urgency. That plays on human nature," Palmieri said. "But you have to know what you are willing to pay so that you don't get carried away. I once paid $25,000 more for some land than I had planned."

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